By Brent Kendall and Jared S. Hopkins
This week's indictment of Teva Pharmaceutical Industries Ltd.'s
U.S. subsidiary on price-fixing charges came after a last-minute
staredown with the Justice Department in which neither side
Prosecutors have been investigating alleged collusion among
generic drugmakers for years, and while a series of cases and
settlements had fallen into place this year, Teva had been more
resistant than other drugmakers in their discussions with the
The department was preparing to charge Teva but gave the company
a chance to appeal to top officials, which it did without success,
said a person familiar with the matter.
Last-ditch talks Tuesday involving Teva Chief Executive Officer
Kare Schultz and the department's top antitrust official, Makan
Delrahim, failed to produce a deal. The charges followed later that
Teva, while seeking to avoid charges, at a minimum wanted the
department to narrow its allegations and agree to a considerably
smaller penalty than it was seeking, said the person. The
department, however, believed it already had offered some
accommodations to Teva and wanted penalties equivalent at least to
what other similarly situated firms had paid; Taro Pharmaceuticals
Inc., for instance, agreed to a $205.7 million settlement.
Teva, in arguing against charges and significant penalties,
touted its role as a manufacturer of therapeutics during the
coronavirus pandemic, but the department's view was that a
negotiated settlement wouldn't have interfered with the company's
ability to manufacture and sell such medications, the person
Mr. Schultz, in an interview, acknowledged he personally
participated in the talks this week and said the principal
stumbling block was over the government's insistence that the
company admit it engaged in wrongdoing.
Teva conducted its own investigation and "didn't see any
evidence that the company had taken part in price fixing or
collusion, so we had a hard time admitting to a crime we hadn't
committed," said Mr. Schultz, who has led the company since 2017 --
after the alleged price fixing took place.
He declined to comment on the financial demands of the Justice
Department. A Teva spokeswoman declined to comment on whether the
company cited the pandemic as a reason to work out an
A department spokeswoman declined to comment.
Israel-based Teva is one of the world's largest generic
drugmakers, with sales totaling nearly $17 billion last year.
Generic medications account for some 90% of medications dispensed
annually in the U.S.
The indictment of Teva includes three felony counts, with
prosecutors alleging the company engaged in three separate
conspiracies of price fixing, bid-rigging and related collusive
activities on a range of drugs, including treatments for high
cholesterol, blood clots and skin conditions.
The indictment, made public Wednesday, alleged Teva and
co-conspirators communicated regularly to increase and maintain the
prices for generic drugs and effectively allocated customers by
agreeing in advance who would win bids for business. Pharmaceutical
firms contract with customers like wholesalers, insurers, drugstore
chains and group-purchasing organizations.
Court papers indicated that prosecutors have cooperating
witnesses from inside multiple generic-drug manufacturers,
Mr. Schultz said that former Teva employee Nisha Patel is the
Justice Department's "key person" but alleged that she has changed
her testimony several times, including after receiving legal
protections from the government. "I would think in the courtroom
that would cast some doubt about the value of the statements from
this person," he said.
Larry Mackey, an attorney for Ms. Patel, declined to
According to a related civil lawsuit filed by state attorneys
general, Ms. Patel worked at the company from 2013 to 2016 and
allegedly played a central role in the price fixing of dozens of
During her time at Teva, the states alleged, citing email, text
and phone records, she was in frequent contact with executives at
rival generic companies to fix prices. She allegedly compiled a
spreadsheet to track potential products for coordinated price
hikes, ranking competitors' product positions in the market.
According to the states' allegations, in 2014 alone, Teva
communicated with employees at other companies, by phone or text
message, 941 times. More than 80% of those communications involved
Ms. Patel and another Teva employee.
Teva itself had an opportunity earlier in the investigation to
secure legal protections from the Justice Department in exchange
for its assistance, but other targets of the probe agreed to help
the government instead, the person familiar with the matter said.
Mr. Schultz declined to comment.
If the case goes to trial, Teva will likely have to grapple with
the fact that rival companies that allegedly colluded with Teva,
like Taro Pharmaceuticals and Novartis AG's Sandoz subsidiary, have
already admitted to wrongdoing in deals with the Justice Department
that will allow them to avoid prosecution.
Asked about those admissions, Mr. Schultz said companies
typically reach deals when it is in their best interests and to
avoid expensive and lengthy trials. And he didn't rule out the
possibility of Teva reaching an agreement with the department in
According to court records from the state attorneys general
litigation, the company's legal team has included Marc Kasowitz, a
prominent New York lawyer with a list of high-profile clients --
including President Trump.
Going to trial isn't without risks for both sides. Teva could
potentially be on the hook for criminal penalties of $300 million
or more if it is convicted, and a conviction could lead to it being
excluded from federal health care programs.
The company also faces the prospect of civil liability to the
government and private plaintiffs.
A courtroom conflict would also bring risks for the government,
which usually resolves this type of case without going to trial.
The Justice Department has won some prominent cases that were
litigated, including the 2012 conviction of AU Optronics for price
fixing on LCD screens and last year's conviction of the former CEO
of Bumble Bee Foods for fixing prices on canned tuna. But it also
lost a notable case in 2018 when three British bank traders were
acquitted of price fixing in the foreign-exchange market.
Write to Brent Kendall at firstname.lastname@example.org and Jared S.
Hopkins at email@example.com
(END) Dow Jones Newswires
August 27, 2020 17:06 ET (21:06 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.